Question Everything You See In The Markets Presently
Dec23

Question Everything You See In The Markets Presently

The chorus of individuals who are in a state of speculative induced euphoria is growing louder. It is a chorus as loud as any I have witnessed, including the late 90s dot com bubble. In those days, I had friends and relatives calling me to discuss stocks like QCOM and JDSU. I knew of a prominent physician who started trading index futures, putting a significant percentage of his net worth (he would later lose his home) into a trading strategy that was based solely on the markets continuing to go up. I would go to parties and the sole topic of discussion would be the amount of money individuals were making in the technology boom. 2017 has been much the same, except that we are now dealing with an unregulated, non-traditional asset class, in cryptocurrencies, that has attracted close to a half trillion in investor assets over the past 12 months. An investment that is a prominent illustration of complete disregard for any of the key tenets of investment, whether value, liquidity or viability. Investors are unknowingly playing musical chairs, while comforting themselves with axioms like, "it's the future." It doesn't stop at cyptos, however. The speculative based mania has started to devour the minds of investors to the point that they believe volatility is a relic of the past, creating a surge in assets based around profiting off of the absence of volatility. And then there is, of course, the popularity of the FANG names. If you weren't invested in FANG names in 2017, or perhaps some of the satellite names in close orbit to FANG, you had tickets to the underperformance theater, where crickets are your stars of the night and moldy cheese is the entree du jour. The theme for 2017 in the markets wasn't anything but get to stampeding with the herd or get to having your head stomped into a curb. If you refused the beck and call of the voracious crowds then you very simply sucked. If you had any sense of contrarianism built into your strategy, you missed. It was a trend followers market in the truest sense of the word, eliminating any and everything else from contention for performance. Markets inherently prey on consensus. They have for literally thousands of years. Human nature doesn't allow for the dynamic to change because psychology cannot converge along the same lines without destabilizing the asset base. While investors are celebrating their victories and bragging to friends, the foundation of the investment is literally crumbling beneath them. We are now deep into the crumbling stage. Consensus thinking will be punished, as always. The only question...

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Concrete Below
Dec18

Concrete Below

You know the market has become a get what you want, free for fall when even the "me too" names are stuffing the pockets of investors. Generally speaking, there is a sub-group of popular names in every market cycle that investors pile into primarily because they are 1) popular 2) they have lagged the leaders. They are comfortable to buy because they haven't really moved. It feels right...and feeling right is typically wrong in speculation. The markets force investors to chase leaders for a reason. FB, GOOG, NFLX have been forcing investors into uncomfortable buying decisions for years now as they ascend an ever steepening ladder. They are bull market leaders. You have to pay a premium to participate. It hasn't felt "easy" to buy any of the market leaders for sometime now. They inherently force decisions that suck for investors because you feel the rug can be pulled under you at any moment. Comfortable buying decisions on the other hand are not rewarded in normal market conditions. So when you see names like TWTR moving up, which has been a darling of investors seeking a comfortable way to play growth, there is a certain skepticism that should greet the move. The skepticism isn't a judgement on the company in one way or another. Rather, it is a judgement on the market for essentially giving up gains to anybody that walks by. More specifically, it's a judgement on the market cycle and where we are within it. This isn't the safe, cushion laden buying environment of a few years ago. It is a different beast entirely. There are no cushions. Only hard concrete below....

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